A big rally helped vaulting blue chip stocks to reach within points of record highs yesterday. S&P 500, for instance, closed only 0.3 percent under its records, as shares recovered from Tuesday’s decline.
Some economic news added to a more optimistic Greek tone yesterday, while today, the opposite was true, with concerns mounting that Greece could default on its national debt. Negotiators would have to reach an agreement before the debt deadline next week.
There were also several bright spots in economic news nevertheless as the U.S. Department of Labor announced today that new unemployment claims stayed last week under 300,000 for the 12th consecutive week. This indicates that the labor market is getting steadier, despite slow growth in spending. Read more about Bright Spots and Summery Outlook 05-28-15
Investors evidently have many reasons to remain optimistic. For starters, we learned yesterday from the Federal Open Market Committee (FOMC) minutes, that U.S. central bank policy makers are in no hurry to raise interest rates.
The minutes released in mid-afternoon yesterday stated that many Fed officials “thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility.” Moreover, very few Fed officials thought they would have enough confidence in June to move ahead. As we have stated for some time, we do not expect the Fed to act too quickly lest it derail the prolonged and slow economic recovery.
Read more about New Day, New Record 05-21-15
Stocks halted the three-day slide today as fewer Americans filed new unemployment claims last week than economists expected, and the U.S. dollar continued its slide. The average number of new applications in the last month is now at its lowest monthly level in 15 years. Workers filed 264,000 new claims in the week ended May 9, according to the U.S. Department of Labor, against the 273,000 new claims economists expected.
The Labor Department also reported that U.S. producer prices in April unexpectedly fell 0.4 percent from March. Read more about You’ve Got AOL 05-14-15
Yesterday, the market was in for a surprise from Federal Reserve Chair Janet Yellen. In response to questions from International Monetary Fund chief Christine Lagarde at a “Finance and Society” conference in Washington D.C., she expressed concern over high stock market values and noted plans to watch the non-bank lending sector closely as well.
“I would highlight that equity market valuations at this point generally are quite high,” Yellen said. “There are potential dangers there.” Regarding U.S. financial stability, however, Yellen believes that risks have moderated and she sees no bubbles forming, although there could be liquidity issues at open-end mutual funds should shareholders engage in a wave of redemptions.
The jittery market fell back further, after a significant decline on Tuesday. On the plus side, today stocks are in a much better mood. Read more about The Month of May Brings Market Jitters 05-07-15
The Federal Open Market Committee (FOMC) yesterday concluded its latest meeting. Information received since March, the Fed stated, “suggests the economy slowed during the winter months, in part reflecting transitory factors.” Labor market gains “moderated” while unemployment “remained steady.” However, the Fed also noted the continued “underutilization of labor resources,” which remained “little changed.”
Despite all this, the committee reported that it “continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace,” and that inflation will rise gradually to the 2 percent target. Read more about Slowing Growth and Interest Rates Concerns 04-30-15